[UPDATED 11/19/14, 6:44pm. See below.] The next time Gilead Sciences (NASDAQ: GILD) has a drug ready for an all-important Food and Drug Administration review, it can jump the line.
That’s because Gilead, the Foster City, CA-based maker of blockbuster drugs to treat HIV and Hepatitis C, paid a little-known Canadian drug company $125 million for a special FDA voucher that it can use to cut four months from a process that typically takes ten months. For a potential high-impact drug, those few months can add tens or even hundreds of millions of dollars of revenues and potentially head a competitor off at the pass.
News of the purchase came this morning from Knight Therapeutics of Montreal, which received the voucher from the FDA as a reward for bringing miltefosine (Impavido) to market as a treatment for the parasite Leishmaniasis.
I wrote in September about the FDA voucher program in the context of the Ebola outbreak. Although the program was approved in 2007 to encourage companies to develop treatments for neglected tropical diseases—tuberculosis, malaria, cholera, and dengue fever are four of the 16 on the list—Ebola has never been one of the target diseases that would win a company a voucher.
David Ridley, one of the Duke University health economists whose proposal sparked the voucher program nearly a decade ago, is among the voices calling for the U.S. Health and Human Services secretary to add Ebola to the list.
The question of Ebola aside, the program has been slow to show results, in part because it was unclear how valuable a voucher would be on the secondary market. In other words, if a company couldn’t apply a voucher to a drug in its own pipeline, how much would another company pay for it?
The first answer to that question came this summer, when Regeneron Pharmaceuticals (NASDAQ: REGN) paid BioMarin Pharmaceutical (NASDAQ: BMRN) $67.5 million for the voucher that BioMarin won under an extension of the FDA program. It now rewards drug makers who bring treatments for rare pediatric diseases to market, and BioMarin won its voucher in February for the approval of a drug to treat Morquio A syndrome. (The rare-pediatric extension has somewhat different rules and incentives than the tropical disease program, but both contribute to the same momentum.)
[UPDATE: The Senate Health, Education, Labor and Pensions Committee passed legislation today that would, among other things, add Ebola to the FDA voucher list and remove discrepancies between the tropical-disease and rare-pediatric versions of the program. Perhaps most important for Gilead, the bill would allow more than one re-sale of the voucher. Under current rules, a voucher awarded for tropical disease development can only be sold once.
According to Congressional news specialists The Hill, a House version of the bill has not advanced past the committee level. Why Congress needs to vote to add Ebola to the voucher list remains a mystery. Federal regulations give the Health and Human Services secretary authority to add diseases to the list. When I asked in September why that hasn’t happened, an FDA spokeswoman wrote that it required “rule making,” which includes a period of public comment: “It is a lengthy process.” It’s unclear if the Congressional approval is part of that rule-making process.]
The voucher can be used for anything in a company’s pipeline, a point that Bill Gates made in 2008 when praising the idea: “If you develop a new drug for malaria, your profitable cholesterol-lowering drug could go on the market a year earlier.”
Gates was prescient. Six years later, Regeneron said it would use the voucher to speed the review of alirocumab, a treatment for high cholesterol that works in a new way, targeting a protein called PCSK9. Regeneron and its development partner Sanofi are racing Amgen (NASDAQ: AMGN), which also has a cholesterol drug, evolocumab, that targets PCSK9. Both companies have released promising Phase 3 clinical data in recent weeks, and thanks to the voucher, both drugs could be up for an approval decision around the same time next summer. (Unless Amgen’s lawyers have their way; the company has sued Regeneron and Sanofi for patent infringement.)
Now Gilead has nearly doubled the going rate for a voucher, paying Knight $125 million. It’s not immediately clear to which drug program Gilead will apply the voucher. A Gilead spokesman told The Globe and Mail the voucher could help with “a number of potential clinical candidates” and a decision will be made as the company reviews its pipeline.
In addition to infectious disease, Gilead has R&D programs in cancer, cardiovascular disease, and respiratory disease. Gilead did not answer Xconomy’s requests for comment in time for publication. [UPDATE: A Gilead spokesman has confirmed the sale and reiterated the statement about the pipeline.]
This year the firm has launched the Hepatitis C drug sofosbuvir (Sovaldi), one of the most financially successful debuts in pharmaceutical history despite its high price tag, because the drug demonstrated high cure rates in clinical trials.
Gilead followed up with an approval for idelalisib (Zydelig) for blood cancers, and then for Harvoni, which combines sofosbuvir with a second antiviral agent, ledipasvir, to be the first Hepatitis C treatment to avoid interferon entirely. (Sofosbuvir alone must be taken with interferon.) Interferon has been the standard of care but cause debilitating flu-like symptoms and other side effects.
When I spoke to Knight chief financial officer Jeffrey Kadanoff a few months ago, he said Knight was in no rush to sell its voucher. “If we don’t get the right price, we’ll wait for the right market conditions,” he told me. “The PCSK9 market was a perfect example. In a head-to-head race with Amgen, four to six months could be the difference in going from second to first in the market. It’s not the only race out there with similar dynamics.”
Knight was spun out of Montreal’s Paladin Labs, which bought miltefosine in 2008. The drug was already approved in Europe, and Paladin had spent roughly $10 million to ready it for U.S. regulators.
It was the fourth voucher awarded by FDA. The first went to Novartis for bringing a malaria drug to market. It applied the voucher to speed up review of a gout drug, but the drug was rejected and the voucher was gone. The second went to J&J’s Janssen Pharmaceuticals for bedaquiline (Sirturo), to treat drug-resistant tuberculosis, the first TB drug in 40 years with a new approach to attack the bacterium. J&J has not used or sold the voucher.